The Kenya Revenue Authority Defends Duty on Used Clothes

The Kenya Revenue Authority has defended the new duty on imported second hand clothes saying the fee was agreed on between the tax collector and the traders in December last year. KRA said that the issues raised by the traders had earlier been raised by Gikomba wholesalers and conclusively addressed through a formal agreement.

In a statement the Commissioner of Customs Wambui Namu, said that as part of its continuous revenue enhancement measures, KRA has consistently taken steps to address weaknesses in tax administration processes. "In this regard, we identified used clothing is an area prone to risk of undervaluation. Following an extensive market survey, it was established that used clothing was significantly undervalued in relation to prices prevailing in the source markets," she said.

The official stated that at a meeting held with Gikomba wholesalers on December 1, 2011, consensus was reached on customs valuation and a benchmark value agreed for customs deceleration purposes. "The consensus was formalized through an MoU as agreed. We have noted compliance from a large number of used clothes dealers and indeed in some instances have noted an enhancement in taxes realized." the statement read.

The government has increased import duty by Sh800,000. The duty has gone up from Sh1.1 million per container to Sh1.9million per container which the traders complain is too high. They are pleading with KRA to consider reducing the charges to save their businesses from collapse.

The said when KRA reviewed the charges they were under pressure because most of them operate bank loans and they needed to clear the imports in order to service the loans. "We had no choice but to accept KRAs position because we had ordered the goods and there is no way we could fail to collect them from the port. We were also avoiding to pay for demurrage [port holding] charges if our containers continued to be at the port." said Paul Karagani an importer.

They said that coupled with the Kenya Bureau of Standards fee, agency and container freight station charges the total amount for importing and clearing one container through the Mombasa port is well over Sh2.5 million. Karagani said that since they started to pay the new duty from of January 15 this year traders have been forced to close because of the rise in costs which has been passed to the consumer. "The whole business has been paralysed. People don't have money and no one can afford to buy clothes at a high cost." he said. "The prices are just too high. A shirt that I bought for 200 shillings, now I am forced to buy it at 250. I don't know who to blame, "said John Ouma who was shopping for shirts at a stall in Gikomba.